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Season 3, Episode 9: Risk Versus Returns: Rethinking the Connection

Published April 15, 2021

With Chris Belchamber, Author of ‘Invest Like The Best: The Low-Risk Road To High Returns’

Chris Belchamber joins the podcast to discuss his book Invest Like The Best: The Low-Risk Road to High Returns and challenge the axiom that market-beating returns are not possible without taking on large amounts of risk.

Belchamber has studied the most successful investors’ track records over decades. One thing they all have in common is prioritizing risk aversion and behavioral discipline. There are simple lessons to be learned for ‘novice’ investors.

Content Highlights:
(Spotify users can link to the segment directly by clicking on the timestamp)

  • Most financial advisers have bought in to the idea that more risk will generate higher returns. This “simple line of argumentation is just wrong.” (6:39);
  • ‘Paradox investing’ and Radobank’s model (10:57);
  • The mindset of successful investors is all about risk aversion. The biggest problem facing investors is their own behavior (13:56);
  • ‘The optimization of the brain’ function: what it is and how to go about it without getting exhausted (17:23);
  • Background on the guest (23:05);
  • Belchamber’s meeting with John Meriwether (26:42);
  • Jim Simons and Renaissance Technologies (28:52);
  • Red flags and other things investors should look for (33:07);
  • The current state of the economic and market cycle and why the second half of this year could be a lot different — and worse (38:29).

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Season 2, Episode 26: John Kay on Radical Uncertainty

Published September 2, 2020

COVID-19 and the pendelum of probabilistic reasoning

University of Oxford economist John Kay joins the podcast to discuss his recent book, “Radical Uncertainty” and its lessons for financial markets in the age of COVID-19.

Content:

  • The premise for the book: Frank Knight, Milton Friedman and the pendelum of probabilistic reasoning (1:20);
  • It is “almost impossible to overstate” the influence of efficient market reasoning on economic and financial market models (4:02);
  • Radical uncertainty: There is a great deal of information that cannot be realistically thought about probabilistically. Enter COVID-19 (8:20);
  • What’s an investor to do with this information? (10:15);
  • Financial modeling has conflated risk, uncertainty, and volatility. They aren’t the same thing (12:53);
  • Time horizons and the importance of imagination. Humans are natural story tellers. This is more important than pure maths (20:24);
  • Where does real estate fit? (25:25);
  • Background on the guest (30:28);
  • What is the market getting wrong right now? (34:37);
  • Short discussion of the U.S. election (41:04).
MoreSeason 2, Episode 26: John Kay on Radical Uncertainty
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Season 2, Episode 16: Chinese Economic Reforms Are Already a Thing of the Past, With Dexter Roberts

Published May 20, 2020

The author of “The Myth of Chinese Capitalism” discusses the ramifications of his thesis

Dexter Roberts joins the podcast to discuss his book “The Myth of Chinese Capitalism.”

In Roberts’ view, economic reforms have already been curtailed under current political leadership. China’s middle class, which has grown almost exponentially in recent decades, remains limited mostly to large coastal cities. The rural countryside, which still represents half the country’s population, remains well below the middle class — and is stuck there, in part due to outdated demographic policies.

The options for Chinese policymakers are limited. They have so far not managed to spread the wealth effects of their “pivot” to a services-based economy, and may have even exacerbated the problem. This all has wide-ranging consequences: for China, for western companies, and for the world.

Content Segments:

  • The first myth: capitalism as short hand for economic reforms (5:39)
  • The second key myth: the middle class will inexorably continue to grow larger (6:35)
  • The global supply-chain diversification, started several years ago and exacerbated by COVID-19, is effectively ending China’s “factory to the world” model (9:21)
  • Authorities’ options are very limited (10:45)
  • Where does this leave Chinese consumers? The days of western companies expanding sales through the growth of China’s middle class are gone (13:10)
  • Background on the gust (20:15)
  • What might the future of China hold? (25:09) The possibility of social unrest (27:14)
  • Brief discussion of Hong Kong: “Don’t think that the protests are over.” (30:22)

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